Mercedes 1999 Annual Report Download - page 73

ANALYSIS OF THE FINANCIAL SITUATION
67
Cash Flow
in billions of €
–25
–20
–30
–35
–15
–10
–5
5
10
15
20
1997 1998 1999
Cash Provided by
Operating Activities
Cash Used for
Investing Activities
Cash Provided by
Financing Activities
maturity of less than three months increased by €2.5 billion
to €8.8 billion (after adjusting for exchange-rate effects).
Despite the transfer of securities to the DaimlerChrysler
Pension Trust, liquidity which also includes investments
and securities with longer maturities, only declined from
€19.1 billion to €18.2 billion.
ONGOING INTERNATIONALIZATION OF OUR REFINANCING
ACTIVITIES.
The funding activities of the DaimlerChrysler
Group increased substantially in 1999 due to the continuing
growth of the financial services business. To achieve this
funding, the treasury centers in Auburn Hills and Stuttgart
used our world-wide group of regional holding and finance
companies as issuing entities in the various capital markets.
Among other bond issues, in 1999 the Group issued its first
global bond, a US $4.5 billion issue as well as a €1 billion
benchmark bond issue. To take advantage of prevailing mar-
ket conditions, funds were raised in other currencies, such
as the Japanese yen, Canadian dollar, Swiss franc and Czech
koruna. Another important source of funding, mainly in the
United States was the securitization of sales financing re-
ceivables.
During 1999, we reorganized our commercial bank facilities,
establishing global credit facilities of US $17 billion, with
commitments from 49 banks.
As a consequence of the solid finance structure of
DaimlerChrysler, the rating agencies, Moody’s Investor Ser-
vices and Standard & Poor’s, confirmed their existing A1
and A+ ratings, respectively, in 1999.
TRANSPARENCY OF RISK IN ASSET AND LIABILITY MANAGE-
MENT. The liquid assets available in the DaimlerChrysler
Group are invested in the money markets and in the capital
markets, with a view towards both the cash flow needs of
the Group and the optimization of returns. Our capital mar-
ket investments are principally in stocks and interest-bear-
ing bonds, using the instruments of modern portfolio man-
agement. Derivative financial instruments are used only to
hedge market risks in asset, liability and foreign currency
management. We use a central front-end system for the con-
stant determination and monitoring of portfolios, market
values and yields.
For the assessment and control of the risk connected with
financial instruments held by the Group, we use a risk limit
set by the Board of Management, derived from the value-at-
risk method, and in accordance with the regulations of the
Bank for International Settlements. For this method, we rely
on the variance-covariance approach based on the Risk
Metrics® model and the appropriate data supplied by J. P.
Morgan. In addition to the historical data for volatilities and
correlations, information from other sources on interest and
exchange rates, which is necessary for the evaluation of all
instruments, is maintained in the financial risk controlling
system.
The following table for value-at-risk shows the possible mar-
ket value fluctuations determined for the stock portfolio and
the interest-rate-sensitive financial instruments of the
DaimlerChrysler Group, including the receivables and
liabilities relating to the financial services business, on the
basis of a confidence level of 99% and a holding period of
five days. Risk-reducing correlation effects between indi-
vidual market parameters are the main reason why the
overall risk is lower than the sum of the individual risks.
Average
for
1999 12/31/199812/31/1999
Value at Risk
in millions of €
Interest-rate-sensitive financial
instruments
Stocks and stock derivatives
Total
81 71 42
105 148 171
127 168 166